1. March 15, 2010 Monetary Policy of Bhutan ROYAL MONETARY AUTHORITY OF BHUTAN Research & Statistics Division (Financial Literacy Program) GOPAL GIRI Research Officer

2. Outline 2  Introduction  Conduct of Monetary policy  Conclusion

3. 3 Introduction  RMA’s functions – Monetary policy  Monetary policy targets

4. Conduct of monetary policy 4  Maintaining of Peg  Volume of money & credit – CRR and SLR, RMA Bills, prudential measures

5. Conduct of Monetary policy (2) 5

6. Conduct of Monetary policy (3) 6 a. Alignment of domestic interest rate with India  RMA liberalized interest rate in 1997  Targets- promote investment and market b. Government Treasury Bills  Monetary policy instrument- Establish Repo/Reverse Repo, bench-mark rates  Short term fiscal management tool 9 December 2009

7. Conduct of Monetary policy (4) 7  Need for effective Rupee management in Bhutan - Correct BOP position with India -Monitor inflows and outlows of Rupees -Maintaining proper account for Rupee in circulation  Importance for Bhutan and for all Bhutanese to use Rupee more prudently 9 December 2009

8. Conclusion 8  Limited Independent Monetary policy- close economies ties with India.  Promoting RMA’s defend mechanism to safeguard Peg Arrangement- Indian Rupee management  Rupee continue to be a legal tender in Bhutan  Current best option for Bhutan to continue with Peg Arrangement 9 December 2009

9. THANK YOU